Banks Ease Limits on Lending

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U.S. Banks Start to Ease Limits on Lending

Source: Wall Street Journal

LendingA brightening economic outlook for the country could be enhanced as big banks begin to ease limits on lending, thereby creating new opportunities for consumers and businesses to borrow and obtain credit. According to the U.S. Office of the Comptroller of the Currency, institutions’ risk appetite has grown, along with the economy, as access to loans has steadily increased.

Making sense of the story

  • According to new reports, banks relaxed the criteria for businesses and consumers to obtain credit during the 18 months leading up to June 30, 2013.
  • A limited pool of loans and a sustained low-interest-rate environment has supported this credit thaw, in addition to the rosier economic picture.
  • A decrease on limits in lending is expected to bolster growth projections. The Federal Reserve predicts U.S. growth between 2.8 and 3.2 percent.
  • In the aftermath of the financial crisis of 2008, U.S. loan growth ground largely to a halt and has remained weak in light of the easy-lending policies that contributed to inflating the credit bubble.
  • Banks are offering the following changes to entice customers: Less onerous conditions for corporate borrowers, giving banks fewer tools if a loan gets in trouble, and longer terms for auto loans.
  • Loan growth has hovered at about 3 percent since late 2012 but is poised to increase. The Federal Reserve Bank of New York’s measurement of U.S. household debt increased slightly in the third quarter of 2013, despite a downward trend since 2008.

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